Federal disability reaches 'end of the tracks' in 2016 if Congress doesn't act

Alabama, more than most states, depends on federal disability payments to support an ailing workforce. But those federal checks stand to run out if Congress doesn't act before 2016.

"I do think that in the next Congress that will be a big issue," Todd Stacy, the communications director for U.S. Rep. Martha Roby, R-Montgomery. "Disability has got to be at the top of the list just because it's at the end of the tracks."

In its annual report on the viability of the Social Security Disability Insurance and Old Age and Survivor's Insurance programs (PDF), the Social Security Board of Trustees warned Congress that if nothing changes the Disability Insurance trust fund would be depleted in two years.

Yet in Alabama, six percent of residents depend on federal disability for support. That's second only to West Virginia.

But the Trustee report suggested there would be no reserve funds left to shore up the Disability Insurance system in 2016. About 10 million Americans - including 300,000 workers and dependents in Alabama - would immediately see benefit payments cut by about 20 percent.

"The DI Trust Fund does not satisfy the short range [10-year] test of financial adequacy," the Trustees stated. In a letter to Congress in July, the Trustees - a six-member board tasked with overseeing the Social Security system, made up of two presidential appointees, three members who serve by virtue of their Cabinet positions, and the Commissioner of Social Security - urged lawmakers to "enact appropriate legislation as soon as possible to make necessary adjustments for the DI program."

The report was no revelation. For years, the Trustees have warned that the trust fund backing up the program was bound to run out, and benefits would be stopped. In 2009, the Trustees predicted the fund would run out in 2020. By 2010, they moved the deadline up two years, to 2018. By 2012, the Trustees settled on 2016.

According to the Social Security Administration, disabled workers draw an average monthly benefit of $1,145. Those payments will drop sharply in the fourth quarter of 2016, when, according to the Trustees, "only about 81 percent of benefits scheduled in current law will be payable." That means an average beneficiary could see their monthly check drop to $927. And the payments would decline from there.

Why is the program insolvent?

The problem with the Social Security Disability Insurance (SSDI) program's ability to pay are much the same as the problems in the Old Age and Survivor's Insurance, or OASI, program, which is the retirement program most people think of when they think of Social Security. The two programs have the same funding source - the 6.2 percent payroll tax (or 12.4 percent for self-employed folks) people see on their paystub that goes to fund SSDI and OASI.

The two programs are often spoken of in a combined manner by the Trustees and others, and referred to collectively as OASDI. Even when combined, the annual cost of the programs begins to exceed the annual incomes in 2020. The reserves would be depleted by 2033.

"The long-term DI program growth was predicted many years ago and is driven, for example, by the aging of the baby-boom generation and the fact that more women have joined the labor force and have become eligible for benefits," said Frank Vierra, the Deputy Regional Communications Director for the Social Security Administration's Atlanta office.

The Trustee report mentions lower birth rates in generations after the Baby Boomers. Increases in life expectancy among older workers could also hit the OASDI bottom line.

So what's to be done?

Rep. Terri Sewell, D-Birmingham, also agreed Congress would tackle the issue, noting that everyone in Congress has people in their districts drawing from SSDI.

U.S. Rep. Terri Sewell, D-Birmingham. (File)

"Our office currently has 108 open Social Security cases, district-wide," Sewell told AL.com. "I think that the overwhelming number of them have to deal with diabetes, arthritis, poor mental health. And I think it's the kind of thing that all of members of Congress have constituent case work, and constituents behind that case work that desperately need assistance. So, I do believe that next, before the trust fund actually runs out, it will be a big issue for us, to discuss how we're going to top it up."

What are Congress's options? The Trustees offered several options.

The immediate stop-gap is to shift payroll tax between the Old Age and Survivors program and the Disability Insurance program, shifting more money to disability at the cost of OAS.

"Lawmakers may consider responding to the impending DI Trust Fund reserve depletion as they did in 1994, solely by reallocating the payroll tax rate between OASI and DI," the Trustees wrote. "Such a response might serve to delay DI reforms and much needed corrections for OASDI as a whole."

That measure could buy time for SSDI before benefits are cut, but it would speed up the depletion of the OAS funds.

The Trustees offered three solutions meant to keep both programs viable through the next 75 years: cut benefits, raise the payroll tax, or some combination of the two.

The payroll tax rate could be increased by nearly 23 percent. Or benefits could be cut by 17.4 percent for everyone, or cut 20.8 percent to new beneficiaries, or some combination of those two. A long-term solution might include a mix of all of those options.